hi, efrverybody, welcome to "on the money." the fed speaks, the markets tremble. what the fed said, what it meant around is the market's winning streak over? >> the hype is a joke. >> spending cuts are just days away, but how much do they matter? what a hedge funds legend says is an even bigger problem. and how one major city wants to put those old phone booths back to work and how high-tech can make a big city run better. "on the money" begins right now. >> this is america's number one financial news program. "on the money." now, maria bartiromo. as we head into a new week, the fed spoke, the market shook. the federal reserve releasing

minutes this week showing it is considering a slow down of the nd buying program. fed members were concerned about the possibility of inflation and of expanding its balance sheet even further. the markets did not like that. the index is having one of the worst days of the year on wednesday. the dow falling triple digits. office depot and office max will be walking down the merger aisle. the two announced a merger to create a company worth about one and quarter billion dollars. it will likely be able to cut costs and increase sales by closinging underperforming stores. some important companies are still reporting. dell beat expectations as did hewlett-packard and walmart. aig came in ahead as well. gas prices are at a four-month high. aaa reporting national prices have risen 43%.

prices usually gup heading into spring and higher crude oil prices are adding to the increase. we've had nervous markets. a smidge of fed speak and the sequester is loomg. what's next for the markets and economy? join i joining me now are two bobs. bob doll, nuveen's equity strategist and bob m mcteer. good to see you. bob doll, let me kick this up with you in the markets. been on a tear lately, but they were spooked this week by the minutes from the federal reserve which suggested they may stop the bond buying program or begin to wind it d down at some point. do you think this is a hick up or the beginning of a downturn for the market? >> look, i think the market has looked tired over the last couple of weeks and this is just another reason. anyone who's thought the fed would buy bonds wasn't thinking

arab rationally. >> bob mcteer, what would be the right strategy? we know that the economy has been slow by but surely coming back and most people will attribute that to the federal reserve stimulus. >> well, it will be good when they can eventually ease up on that and abandon it, but i don't expect that to happen this year. i think we can count on the fed's significant support throughout this year. >> how would you characterize the economy, bob mcteer? >> well, it's vulnerable and it's weak. i think the fourth quarter negative number will be revised into a slight positive. i think the first half of this year will suffer a little bit from the tax increases and possibly the spending reductions that are scheduled next week. but i see no reason that it won't take off and be much

healthier in the second half of the year. >> so, bob doll, we're seeing the rurn eturn of deal making ie markets. that's one way companies have been using their cash. you saw office depot, office max. last week, berkshire hathaway way. lot of deal flow. what do you think that says about the markets? >> i think it's a measure coffs is going from low levels to less low levels. we know there's a lot of cash out there. and if you don't have cash, you can borrow it, but not everybody can. if you're able to borrow it, it's pretty cheap companies are struggling to grow organically. >> so, bob mcteer, what about that. ben bernanke is testifying before the senate next week. what can he say at this point? what are you expecting from that testimony? >> well, i think he needs a give a pep talk to the fiscal policymakers that there's more than one game that can be played here and fiscal policy's been a

wall. i think the really important thing is to start working on the entitlemt programs. it's not so important what happens to discretionary spend right now, but we've got to start doing something to reduce the entitlement spending in the upcoming years. >> everybody says that. this program alone. you've got so many people saying we have got to get to the entitlements, and the sequestration doesn't even hit entitlements. >> we don't seem to have anything else on the plate right now. i don't think that's going to be as serious as people are fearing it will be. as far as what's wrong, i think, i think jerry of congressional districts play a large role in this because most of our congressmen are very secure in their jobs and they can afford to take extreme positions and not, not be willing to

compromise. >> so, in the face of all this, bob doll, how do you want to invest? what sectors do you like? where shou investors be exposed and do you want to lighten up here? >> well, despite the government and bob had it all right including the gerrymandering point. the u.s. economy in the second half wilbe stronger than in the first half. emerging markets are grabbing ahold, so the world is healing. it's becoming less bad, if i can put it that way. as a result, i want cyclicals. some industrials, some technology. an energy or material company here or there. in defensive, i like health care. they're the kinds of names, free cash flow oriented, that i think can win. >> great to have you. >> thanks, maria. >> see you soon. up next, we're on the money, a legendary hedge fund manager speaks out about entitlements and america's future. and the clock is ticking. the sequester deadline draws

near. what washington is waiting for. plus, later, technology may be where the jobs are. what the sector's booming business means for local governments. i'll talk to new york's top tech geek.

legendary former hedge fund manager stanley drukenmiller and jeff canada teamedam up to rais awareness and warning about what they say is a much bigger problem than sequestration. that is the debt. this week, i spoke to them both about the bond market, unintended consequences and entitlements. >> the implications that we are going to spend money to go to education, it ought to go to research and development. we're going to spend that money now on medicare, medicaid and social security.

>> they totally take the pass on entitlements, which is the problem and then the president comes out and says, i'm not going to do this on the back of seniors. well, those seniors as we put in the article, are all taking out more than they put in. the bond market is a funny thing. in greece, the bond market was perfectly fine until february of 2010. not movinging, not doing anything and then in two weeks, it was over. when we were at 10 trillion and now, we're at 16 trillion, the interest cost on 16 trillion is 20% less than it was on the 10 trillion. now, come on. do you think that's sustainable? so, if you normalize interest rating, i'm not talking about just normalize where they were before qe and took them to 5.7% federal fundingng cost of this debt, that's 500 billion a year. in interest expenses goes out the door. we're having a heart attack over an $85 billion sequester when we can lose 500 billion just if you

normalize? but the way markets work, if and when this were happen, you keep going because the market figures out you have a credit problem, which is what's happened in the foreign nations. >> do you think we'll see a bhoe up? >> the biggest is congress not getting the market signal. you can scream all you want about congress and the president being clowns, i can't think of any political system anywhere where they acted without interest going up. when did the greece act? when their bond market blew up. what was clinton's great line about reuben? you mean the f-ing bond market is in control? remember that? the politicians have no incentive but the market is a fickle and violent thing and one day, it goes like that. zpl. >> the clock is ticking closer.

the cuts are set to go into effect friday, march 1st. joining me now, two co-chairs f the caaign to fix the debt founded by alan simpson, judd gregg from new hampshire and ed rendell,l, the former chair of e democratic party. thanks for joining us. so, what do you think? assuming the affects kick in, what is the immediate impact? ed rendell. >> well, in the very short-term, it will be limited impact, but as the days ghooes on, you'll s people let offf the federal government. you're going to see defense workers let off of their jobs. you're going to see the federal bureaucracy if not grind to a halt be limited in its ability to protect us and keep things moving. it's going to be a real difficult time and it's happening at the worst time when the economy took a hit the last

quarter. when it's vulnerable. what we need to be seeing investments in the economy. it's t it's a bad thing for the nation. the only thing almost as bad is if you kick the can down the ro. >> do nothing. >> judd gregg, how do you see it? >> the same way governor rendell sees it, which is it is a severe way if t.o. get spending under control. but it was set up for one purpose and that was to force the administration, the congress, to come to an agreement and it represents a true opportunity for the two parties to get together here and replace the sequester, which is a $1.2 trillion across the board discretionary cut. the changes that have to be made in entitlement programs to get our fiscal house in order and that's what should be done. that's the way you relieve the pressure of the sequester and that was the concept of creating it in the first place. >> so, how come something big is

not getting done? even this friday's cuts, they don't even touch entitlements. just sort of throwing darts at the defense industry. >> i think the problem is that neither side is willing to stake outainful positions. the president says he's for change cpi, which is a good start, if he wants to get some additional revenues, he's got to beef up significant entitlement reductions, that will have a long-term effect in the second ten years as well. it's a good start, but he hasn't talked to the democrats in the house and senate and he hasn't gotten them touy in yet and that's one of the things that executive leadership has to undertake. >> you know, ed's absolutely right. the president actually did put a very significant item on the table in the cpi and the importance of the cpi isn't the first ten years, the importance is that it multiplies quickly and by the third ten-year period, you're talking trillions of dollars of savings, but he

hasn't led in the since that he hasn't given the political cover members of his party need and what you need is a package here that both sides can come to the table on and agree on. the majority of it's going to have to come on the spending side, but there will probably have to be some revenues through tax reform and the two sides have to get ma chur and face up to it. my concern is the window's closing fast on the opportunity to do something. not guilty only politically, but if t the fed starts to move on interest rates and we see rates go up, we can see a radical increasese in the cost of payin the debt service for the federal government, which will blow a huge hole in our capacity to get our deficit under control. >> what's the danger to these cuts? through 2021, what's the impact? is there a danger in terms of feeling the worst of it? >> there's a huge danger if it

were carried forward because it is extremely arbitrary. the ledger has taken a $900 billion cut as a result of the act of 2011 and the problem is is not on the discretionary side of the ledger. it's on the entitlement side. and the markets and everybody else will know that's a fake attempt to try to get our house in order. our fiscal house in order and there will be a financial reaction which will result from it. >> so, governor rendell, if the problem isn't entitlements, that's where much of the spen spendsing of the government is going. they know these programs have to be changed. how come the president and congress won't do it? >> they're afraid to go first. it's like who's going to stick their toe in the water first. it's a little bad news because

you tell -- the reduction and benefits. i think it's a relatively slight reduction. as judd said, the payoff is big in the second ten years, but nobody wants to be the bearer of bad tidings. that's where the president needs to step up and lead. i think they will sign on, but to get the majority of democrats, you're not going to get all the democrats on change cpi, but you got to go to nancy and say, nancy, harry, this is what i need. this is what the country needs. put your personal preferences aside. let's make this deal because if we do this, we believe the economy will absolutely take off. >> all right. we will leave it there. good to have you. thanks so much. >> thanks, maria. >> see you soon, judd gregg and ed rendell. up next, reinventing pay phones in a smart smphone world. harn eszinging technology to make new york run better and richer. and tell us what you think about the

e > it was designed to escap the ordinary.. it feels like it can escape gravity.

silicon valley, the sector is driving much of the vibrancy. michael bloomberg announcing this week a new initiative to spur home grown start-ups with a series of incentives to businesses made in new york. rachel haot is the chief digital

officer. good to have you. so, made in new york. this is a brand new campaign for film and television, produced in new york. this week, the city announced expanding it to technology and digital companies. what's the strategy? >> well, we've seen over the past several years the tech community in new york city has grown and our tech sector has arrived. what's amazing is we have over 900 tech companies here in new york city that are 75% or more developed in the five boroughs. over 120,000 people with working in the sector. we thought it's important the world is aware of this. we launched we are made in new york. it's a one-stop shop for all the programs and resources that you need to participate in the new tech ecosystem and crucially, find a job. >> talk about this boom in the technology sector. what does it mean in terms of

economic impact? certainly, the local impact has to be very strong. >> absolutely. one of the hallmark ps of the bloomberg administration has been to diversify the economy. we have so many industries here that are so powerful. media, fashion, finance and real estate. a lot of these are driving the business models of the techec sector, so it makes sense the companies are based here. 2012 was a fantastic year for tech in new york city. over $8.3 billion worth of acquisitions. >> tell me about your position. engaging new york erers in this era. how did you role fit in the urban government? we had two hurricanes hit. >> our focus is support innovation inside and outside government and day-to-day, what this means is we're making it easier to navigate government digitally and supporting new york's tech sector. that brings in a lot of public,

private partnership. especially in situations where perhaps you just had enough of the cig cal to get that tweet or see that last facebook update, we were able to reach millions of people and had partners like twitter step up to the plate and donate thousands of dollars worth of promotion related tweets. we had google helping us fill a map showinwhere shelters were located. it was truly a great effort and the tech community played a great deal role. >> i love your upcoming project of revamping phone booths in new york city. we remember those phone booths. how can we recredit what's there to take it up to the next level in terms of technology? >> exactctly. we have the reinvent pay phone challenge. what that does is reinvite ideas

from the public. we've got 11,000 p00 phones. at the height, we were seeing 30 million calls a year and now, about 5 million calls a year. in situations like hurricane sandy, they were crucial because they keep power and can connect people in an emergency. we know people are are using pay phones less because they've got mobile phones. wi-fi hot spots, charging stations, the ideasreally a limitless and the submissiomins closed on monday. we had over 125, so now the challenge is narrowing it down for a big demo day that's coming up. >> good to have you. rachel haot. as we take a break, take a look at how the stock market ended the week.

now a look at what's coming up in the week ahead. earnings are out from retailers. home depot, best buy, macy's, sax and grupon. schiller homes price will be released. as well, the new homes sold in january.

ben bernanke will begin two days testimony before the senate banking economy. on thursday, the second quarter of domestic product is out and friday is march 1st. we look at data on american's personal income and spending. thank you so much for being with me and next week, my guest, cliv davis. have a gre